United Airlines has won significant private sector funding, and is working on government backing, to successfully leave court bankruptcy protection by mid-2004.
United Airlines has secured $2 billion in financing from JP Morgan and Citigroup in a major step towards leaving Chapter 11 bankruptcy protection. The aim is to file with the court to leave bankruptcy during the first quarter, and to exit by the end of spring, says United chairman Glenn Tilton.
United is hoping to conclude $1.8 billion in federal loan guarantees from the Air Transportation Stabilization Board (ATSB) shortly. It has updated that request repeatedly since the board rejected it a year ago. The exit financing from the banks sees them each underwriting $200 million of the non-guaranteed portion of the facility and $800 million each of the guaranteed portion. This portion requires the backing of the loan guarantee from the ATSB.
The money will be used to pay outstanding debtor-in-possession loans and meet United's cash needs when it leaves Chapter 11. Tilton highlighted the competitive terms of the package and that it underlined the "credibility of our plan for the future".
Although the timetable to leave bankruptcy is a slight delay from United's earlier planning, the carrier has had to resolve major issues such as its pension liability and its relationships with Atlantic Coast Airlines, the United Express feeder on the East Coast. Executive vice-president customers John Tague says that United is well on the way to arranging for feeder service at its Washington Dulles hub if Atlantic Coast proceeds with its plan to split from United and become an independent low-fare regional.
The pace of United's reorganisation "is escalating", says Tague. Almost all of its fleet refinancing is completed, he adds. Since the crisis of 2001, United has cut its costs by $5 billion, taken $6 billion of debt off its balance sheet, slashed annual aircraft leasing costs by $500 million, cut capacity by 25% and reduced its headcount by 38%, says Tilton.
Tague says that revenues are up and that bookings looked strong for the normally slow winter season. He says growth in revenue was "probably more encouraging in the fourth quarter than we experienced in the third". United posted a $60 million operating profit for October, in sharp contrast to the $31 million operating loss of September.
DAVID FIELD WASHINGTON
Source: Airline Business
